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IN THE SUPREME COURT OF THE UNITED STATES
- - - - - - - - - - - - - - - -X
VERIZON MARYLAND INC.,
Petitioner
v.
:
:
:
No. 00-1531

PUBLIC SERVICE COMMISSION OF
:
MARYLAND, ET AL.,;
and
UNITED STATES,
Petitioner
v.
:
:
:
:
:
No. 00-1711

PUBLIC SERVICE COMMISSION OF
:
MARYLAND, ET AL.
:

- - - - - - - - - - - - - - - -X
Washington, D.C.
Wednesday, December 5, 2001
The above-entitled matter came on for oral
argument before the Supreme Court of the United States at
11:01 a.m.
APPEARANCES:
MARK L. EVANS, ESQ., Washington, D.C.; on behalf of the
Petitioner in No. 00-1531.
BARBARA B. McDOWELL, ESQ., Assistant to the Solicitor
General, Department of Justice, Washington, D.C.; on
behalf of the Petitioner United States.

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APPEARANCES:
SUSAN S. MILLER, ESQ., General Counsel, Public Service
Commission, Baltimore, Maryland; on behalf of the
State Respondent.

2
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ORAL ARGUMENT OF MARK L. EVANS, ESQ.

C O N T E N T S
PAGE

On behalf of the Petitioner in No. 00-1531 ORAL ARGUMENT OF
BARBARA B. McDOWELL, ESQ.
On behalf of the Petitioner United States ORAL ARGUMENT OF
SUSAN S. MILLER, ESQ.
On behalf of the State Respondent REBUTTAL ARGUMENT OF
MARK L. EVANS, ESQ.
On behalf of the Petitioner in No. 00-1531

3

11

26

43

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P R O C E E D I N G S
(11:03 a.m.)
CHIEF JUSTICE REHNQUIST: We'll hear argument

next in No. 00-1531, Verizon Maryland v. the Public
Service Commission of Maryland and United States v. Public
Service Commission of Maryland.
Mr. Evans.
ORAL ARGUMENT OF MARK L. EVANS
ON BEHALF OF THE PETITIONER
MR. EVANS: the Court:
Unlike Mr. Smith, Verizon takes the position
that these contracts are, in fact, pervasive and Federal,
and I'd like to tell you why. The statute, by its terms,
Mr. Chief Justice, and may it please

requires us to enter into these relationships whether we
want to or not. It dictates the subject matter of the

negotiations, it provides that the agreement has to be
approved by the State commission but under Federal
standards spelled out in the statute. Once approved,

moreover, these agreements are binding not as a matter of
State law but as a matter of Federal law, which is
provided for in 252(a)(1) of the statute.
QUESTION: MR. EVANS: 252(a)(1)?
(a)(1), and finally, and in some

ways most tellingly, every provision of an approved

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agreement is like a tariff made available automatically to
every other carrier that wishes to adopt them, and the
Court upheld that in the Iowa utilities case even though
it was challenged, but the function of not only the
agreement's terms but every interpretation of an
agreement's terms has Federal reverberations. These are

not cases that -- with which the Federal Government has
washed its hands.
QUESTION: Well, what about Justice Stevens'

example in the previous case, do you pay on Tuesday or do
you pay on Thursday?
MR. EVANS: Mr. Chief Justice, I think that is a

hard question in terms of the way it was put, and I think
the answer, to be consistent, is yes it belongs in Federal
court, and the reason I say that is because just like a
Federal tariff, where there's a question about the payment
date, it belongs in Federal court. That -- the Court has

held that in many cases involving Federal tariffs, one of
which we've -- two of which we've dealt with in the brief,
one of which is Thurston Motor Lines, which is in 460 U.S.
QUESTION: How many of these agreements,

negotiated or otherwise, are there Nation-wide?
MR. EVANS: QUESTION: me --
They're -- they're
Do you have any idea? I mean, give

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MR. EVANS: QUESTION: MR. EVANS:

-- limited to --
-- a magnitude.
I'm sorry. They're limited to the

boundaries of the State in most instances, although the
negotiations in one State have reverberations for the same
two parties in other States, as, for example, with
Verizon.
QUESTION: I'm just wondering how many pure

contract cases are being dumped into Federal courts by
your --
MR. EVANS: QUESTION: MR. EVANS: Oh, I see.
100,000?
I think the -- I don't have a
I can say that I don't think once

number, Justice Scalia.

the big issues are resolved there's going to be many of
them, and the big issues tend to be like the issue in this
case, where the very contract says, on the point in
dispute, that the parties agree that reciprocal
compensation will be paid only to the extent required by
the statute, naming a specific section of the statute.
QUESTION: Yes, but you say every time there's

any dispute on this contract, even as to what date payment
should be made, you run into Federal court.
MR. EVANS: Well, I mean, yes, but as a

practical matter the issues will not be brought to Federal

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court unless there's a lot of money involved and the
issues are very important for a variety of reasons. not a cost-free proposition to go to Federal court.
QUESTION: I thought a tariff -- I mean, you're
It's

talking about a State railroad tariff?
MR. EVANS: QUESTION: No, not a --
No, of course a Federal railroad
Nobody doubts that. What

tariff is a Federal question.

they're saying is, here, the structure of this statute is
to have State commissions run these agreements, period.
Now, of course, they have to be sure that the State
commission satisfies certain Federal standards, which
might have been minimal but have turned out not to be so
minimal.
MR. EVANS: QUESTION: Well --
But -- so I don't see how in answer

to Justice Stevens -- and I think it does create a
problem. I don't see how you can put all the -- every

detail of this State contract in a Federal court, calling
it a Federal question, and once that's so, there does
become an issue as to whether Congress bifurcated this and
said, as is true of all other State agencies, you have a
Federal question, you can go into Federal court. throw them all in the State.
MR. EVANS: Well --
Or said,

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QUESTION: MR. EVANS:

What's your response?
Well, two things, Justice Breyer.

First, the -- if you look back at this Court's Federal
tariff cases you find that the reason these cases wound up
in Federal court, even though lower courts in the cases
have almost routinely said this looks to us like a run-
of-the-mill state contract issue, is because the tariff
itself derives its authority and depends entirely upon the
Federal statute. That's what makes them Federal statutes,

because of the Federal Government's interest in the whole
process.
QUESTION: Transit case, then?
MR. EVANS: Jackson Transit actually was a case
What's your answer to the Jackson

involving a contract under the Urban Mass Transit Act in
which the Court's analysis proceeded as follows. it said these are inherently, pervasively Federal
contracts -- e agree with that -- and but for a contrary
indication in the text of the statute or the legislative
history we would view those as Federal issues that belong
in Federal court, but the Court went on to look first at
the text where they found the issue not conclusive, and
then to the legislative history where it found that
Congress made a specific determination that it did not
want these cases in Federal court. There is no such
First,

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analogy in the case here, and in fact, if anything, the
suggestion is to the contrary, because when Congress did
address the question of jurisdiction, albeit it perhaps in
narrower terms than we would have liked. It made clear

that the -- that there's jurisdiction in the Federal
courts and that, moreover, State courts are foreclosed
from involvement.
It's odd to imagine why an issue like the one in
this case which could just as well have come up at the
approval stage, but didn't until the interpretation stage,
in part because the Internet exploded in the interim. In

one case it goes to Federal court, in the other case it
goes to State court. It just doesn't -- it doesn't make

sense that Congress would have envisioned that outcome.
There has been discussion about whether
252(e)(6) in some way restricts the provisions of --
excuse me, the availability of jurisdiction under section
1331, and we think the answer to that is quite clear not
only from the general presumption against that kind of
restriction that the Court has articulated from time to
time, but also because in this statute Congress actually
enacted a specific rule of construction in section 601(c)
of the act which is actually not in the joint appendix and
not codified. It appears as a -- in the note to 47 U.S.C.

152, and what it said there was that nothing in the act

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should be construed to modify, impair, or supersede
Federal law unless expressly so provided.
So Congress spoke to what inferences could be
drawn from a limitation of jurisdiction in 252(e)(6) and,
moreover, there -- the Court has -- I mean, the Congress
has shown repeatedly, both in this statute and in other
statutes, that when it wishes to preclude review in one
court system or another it spells that out specifically,
as it does in 252(e)(4) here with respects to States, as
it's done in a variety of statutes that we and the
Government have cited in our briefs with respect to the
other -- with respect to the medicare act.
And finally, let me just say a word about the
impracticality of the bifurcation that I think Mr. Smith
is striving for here. It would mean a bizarre separation

where a case could come up with an interpretation not only
of -- not only of the issues we think are binding as a
matter of Federal law, but also State law issues that the
State put in as part of its review, and from Mr. Smith's
point of view, if it's interpretive, it all goes right to
State court.
In our view, at least all of the Federal issues
come to Federal court, and probably the State issues can
come along under supplementary jurisdiction, although
there may be a -- may not be possible to name the State in

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that context.
QUESTION: 1331?
MR. EVANS: Yes, and this Court once before had
You say they're going there under

before it a bifurcation scheme that had been proposed,
actually decided by the Seventh Circuit, as it was in this
case, and that's the Bank One case in 516 U.S., and the
Court said, this is just too unwieldy and inefficient a
system for us to impute the Congress, even if the language
were clear, and here the language by no means even
supports the outcome.
Unless there are further questions, Your
Honor --
QUESTION: Thank you, Mr. Evans.

Ms. McDowell.
ORAL ARGUMENT OF BARBARA B. McDOWELL
ON BEHALF OF PETITIONER UNITED STATES
MS. McDOWELL: Initially, I'd like to note that

although this -- in this case the Court granted certiorari
only on the question of jurisdiction under section 1331,
if the Court determines that there is a standing problem
in the Mathias case, all of the other questions on which
the Court granted cert in that case are also presented
here, and section 1331 gives the district courts
jurisdiction over claims at least that a State commission

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has acted contrary to controlling Federal law in
construing or enforcing an interconnection agreement.
Such claims arise under the laws of the United States
within the meaning of section 1331.
QUESTION: Excuse me, how does a State

commission act contrary to Federal law in construing an
agreement that clearly says X, which is contrary to
Federal law, but I mean, the State commission is just
saying what is the truth. Federal law?
MS. McDOWELL: For example, let's say that the
How is that acting contrary to

FCC had issued a different order with respect to Internet
calls than it actually did. What if the FCC had said that

no agreement under section 252 can be construed as
providing reciprocal compensation for Internet service
provider --
QUESTION: They wouldn't say that. What do you

mean, can be construed? I mean, that's fine.
MS. McDOWELL:

Can be enforced, which provides,

Well, it -- the commission

conceivably could have said if the contract is silent on
the specific subject --
QUESTION: Oh -- yes.
-- or whatever.

MS. McDOWELL:

In any event, one can envision circumstances in

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which --
QUESTION: Okay, but you -- but sure, I mean, if

you posit that the Federal regulation says no contract
shall be construed this way, no matter what it says, no
matter how clearly it says that, then I agree with you,
the commission would be violating Federal law, but let's
assume a more normal FCC regulation which just says that
this particular disposition is unlawful, even if you do
agree with it, okay, and all that happens is that the
State commission says, yes, they're -- that's what they
agreed to, okay. Now, how does that violate State law?
It may not. It may be --

MS. McDOWELL: QUESTION:

Federal law, excuse me.
It may be the rare case in which

MS. McDOWELL:

a State commission decision interpreting a negotiated
agreement will -- can be alleged to violate Federal law.
I think the questions are more likely to come up with
respect to interpretation of terms of an arbitrated
agreement where the State commission was --
QUESTION: the commission? What is the actual question before

Is it, what did these parties mean by

their agreement, and nothing more than that, or is it
something with more legal overtones to it?
MS. McDOWELL: This has been sort of a moving

target, because the FCC's orders have been subject to

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review and have been vacated, so -- but the claim was that
under the commission's initial order with respect to
Internet calls
QUESTION: No, I meant the rules of the State

commission, not the FCC.
MS. McDOWELL: Well, the State commission, after

looking at the FCC's orders and the statute, decided that
there was -- the FCC had said it was permissible to adopt
either rule, to read these agreements either as providing
reciprocal compensation for these calls or not, and gave
some factors that State commissions might look to in
construing agreements, and that is what it did.
QUESTION: For instance, if you go to a State

court, I'm A, I'm suing B because we have a contract, the
final decision of the State court isn't just necessarily
the parties agree to this. They have to go further and

say, well, is this -- is there any State law prohibition
against this kind of an agreement, and what are the
results in this particular case, does A owe B money. Does

the commission, State commission have that broad an area
to deal with the contracts under this statute?
MS. McDOWELL: Yes, and certainly it's subject

to the standards of 252(d) with respect to assuring that
the public interest, convenience, and necessity is served,
and it needs to look at the polices as articulated in the

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Telecommunications Act and by the FCC in its regulations
and orders, so it's a broader mandate than just looking at
the parties' intent, yes.
Whether this will always present an issue of
Federal law is, of course, not clear, but where there is a
claim that what the State commission has done is contrary
to the 1996 act, to the FCC's orders under the act, or to
some other provision of Federal, constitutional, or
statutory law --
QUESTION: Ms. McDowell, would you clarify what
There

you define as the Federal question in this case?

were a lot of arguments that were made by Verizon like,
this is a Federal tariff, in effect, like the State
commissioner simply is saying that it is for this purpose
a Federal agency.
In your brief, the only thing that I recall --
maybe I got this altogether wrong -- was, you said the
Federal question is an FCC order which would be
controlling, and that FCC order, it turns out, has been
vacated by the D.C. Circuit, so I'm really left at sea
about what is the Federal question.
MS. McDOWELL: Verizon's complaint, and that's

in the court of appeals joint appendix, was really quite
bare bones. It alluded to the FCC order that's since been

vacated, as you mentioned, and to other principles of

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Federal law, and it just simply alleged that the Maryland
commission's decision was inconsistent with Federal law,
also with the language of the agreement, and is arbitrary
and capricious, so it was a very general claim.
The district court construed Verizon's claim as
being that the Public Service Commission's order is in
direct conflict with a declaratory ruling of the FCC, and
that's on pages 1 to 2 of the court of appeals joint
appendix. I think the principal --
QUESTION: That ruling has been vacated.
That's true. There's now a new

MS. McDOWELL:

ruling, and that's being litigated in the D.C. Circuit.
I think as currently articulated Verizon
contends that among other things the Maryland commission's
order is contrary to section 252(a)(1) of the act, which
requires these agreements to be binding, and the
allegation is that the commission has violated that
commission by writing additional terms into a party's
agreement. Whether that is a viable claim or not need not
It's at least a sufficiently

be decided at this point.

nonfrivolous claim to state a Federal claim.
QUESTION: Can I get a clear restatement, if you

like, of just what you think -- I mean, on the overall
question I now see three possible ways you could go. number 1 is just what we heard. These contracts are
Way

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creatures of the Federal law, so much so that everything
about them is Federal, they all go into Federal court.
The opposite view, no, everything about them goes into
State court, with one exception. The exception is

approval or rejection, which is a narrow proceeding that
happens once. That puts 98 percent of the cases in State

court for everything.
Choice 3, the compromise, which is some form of
which I think you're advocating. That would have to be,

the Federal questions come into Federal court under either
252 or 1331. I don't know if it makes any difference, but

they're in Federal court, the Federal questions, and where
they're all mixed up with State interpretation you have
three choices. Each Federal judge is on his own. 1) It's

their supplementary jurisdiction, 2) they have some form
of abstention, to wait, 3) they do something else. don't know what it is, all right. let's call that a hybrid approach.
I want to know which of those three positions
the Government takes, and I think it's the last one, and I
want to know precisely how all this works out.
MS. McDOWELL: I wish I could tell you precisely
When the --
I

But in other words,

how it would work out in every case. QUESTION:

5 minutes or less.

(Laughter.)

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QUESTION:

You know your favorite view of it.
Yes. When there is a claim that

MS. McDOWELL:

a State commission order is contrary to controlling
Federal law, that claim should come into Federal court.
If the only claim is a violation of State law, it should
go into State court. If there are both kinds of claims,

they can perhaps be brought in Federal court under
supplemental jurisdiction, but then there's a question of
the State officials' sovereign immunity, assuming that
they're a party and they haven't waived sovereign
immunity, because the State law claims can't be
adjudicated under -- according to Pennhurst in Federal
court.
So the optimal solution in many of these cases
may be to bifurcate, or may be to bring the case in State
court, and the State courts, of course, are competent to
hear these cases as well, but we don't think that Congress
intended to preclude the opportunity of parties to go to
Federal court on these claims when they have a Federal
claim under --
QUESTION: Let's put the question the other way.

Why would Congress have wanted to provide for a bifurcated
scheme, which we know is going to lead to all kinds of
pleadings chicanery in order to get it into one court or
another court, and we're going to have endless disputes

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about the pleadings. kind of a system?

Why would Congress have wanted that

MS. McDOWELL:

Well, it is the system that we
Parties do have the option of

have generally, Your Honor.

taking their claims to State court or to Federal court,
and Congress may have been --
QUESTION: But I think you're -- aren't you

positing a system in which there -- I was going to say,
aren't you positing a system in which, as a system, we
assume there is going to be some kind of a system of
utility regulation, and there isn't going to be a system.
Some utility regulation through contract interpretation is
going to be done in State courts, some of it's going to he
done in Federal courts, parties in essentially the same
situation are going to be making inconsistent choices, and
you're not going to have a resulting coherent system.
MS. McDOWELL: Well, we already know, of course,

under section 252(e)(4) of the act that a number of these
cases are going to be in Federal court, and what seems
particularly irrational is that if there was exclusive
Federal court jurisdiction over some category of cases and
exclusive State court jurisdiction over the same sorts of
issues when they arise in an interpretation context as
opposed to an approval context, so that seems clearly what
Congress could not have meant.

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QUESTION:

May I ask -- oh, excuse me.

May I

ask just sort of a broader question?

My recollection is

that all the cases we're familiar with so far run around
as one issue about local calls to the Internet and so
forth. pattern. I have the -- a feeling that there must be a
All these agreements have a great deal of

similarity, same kind of issue, same kind of litigants on
both sides. I wonder if there really is a mountain of

litigation out there, or if they only have -- a very few
test cases may resolve most of these issues. view on that?
MS. McDOWELL: Well, I think this particular
What's your

issue involves large amounts of money --
QUESTION: Right.
-- tens if not hundreds of

MS. McDOWELL:

millions of dollars, and that's why it's being litigated.
QUESTION: But are there similar issues bouncing

around in State and Federal courts, or is this sort of the
only thing they're fighting about?
MS. McDOWELL: I wouldn't say it's the only

thing they've been fighting about, and I'm not familiar
with all the cases that may have been brought, but
certainly these are the leading categories of cases at the
interpretation stage. Certainly at the initial approval

stage there are a number of cases that have made their way

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to Federal court on a variety of issues which principally
concern whether the State commission has --
QUESTION: At the approval stage, there's no

doubt about where those go.
MS. McDOWELL: Right. It also should be noted

that most of these interconnection agreements build in
some form of alternative dispute resolution process that
there is some negotiation between the parties. Sometimes

there is formal arbitration to resolve these disputes, so
it's not necessarily clear that they will all proceed
through this particular process.
QUESTION: Do you know -- do you have any sense

of this in the hybrid -- in the hybrid system that we're
describing as concerning Justice Souter, that I agree with
you is supposed to be the norm in respect to State
agencies after the Chicago case. Now, one of the concerns

in Chicago, and you may have come across this in your
reading, or just experience, would be there would be,
then, a lot of cases, because it covers every State
agency, where people would run into Federal court on a
Federal question related to a basically State matter, and
they'd bring in and get review through the supplementary
jurisdiction of all kinds of State issues.
Has that happened? I mean, is this the norm?

Do you have any sense of what actually happens in, let's

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say, the 40 million State proceedings that go on every
week?
MS. McDOWELL: I don't think there are nearly
In some of these cases

that many State proceedings.

involving reciprocal compensation for Internet calls, yes,
parties have asserted, as they have here, State law claims
as well as Federal law claims, and some Federal courts, at
least where there's been no objection raised by the State
commission, relating to sovereign immunity, have exercised
supplemental jurisdiction over these claims.
QUESTION: Ms. McDowell, regarding your earlier

answer to Justice Souter as to why Congress would have
wanted such a crazy, hybrid system, I mean, this piece of
legislation was an extraordinary intrusion of the Federal
Government into local utility regulation, wasn't it? mean, this is an area that has traditionally been
regulated by the States. The Government has regulated
I

interstate communications, but here they are getting into
local communication regulation.
MS. McDOWELL: QUESTION: But this isn't their --

And was there not a feeling in

Congress that we should take as little as possible away
from the States, if they want to continue their
traditional regulation, and if it ended up in a hodge
podge system, maybe many in Congress said, so be it. Is

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that not a sufficient explanation?
MS. McDOWELL: explanation. That might indeed be a sufficient

I would preface this by saying that although

local competition surely has traditionally been regulated
by the States, this act dealt with something a little
different, encouraging competition between local carriers,
which was quite new at the time this 1996 act was adopted.
QUESTION: Well, it may be a new Federal policy,

but to regulate concededly local telecommunications was a
major step for the Federal Government, and maybe they
didn't want to get into the business of doing that, which
is why they leave it optional to the States whether they
want to implement it or not. The Federal Government

didn't want to take on these things, neither at the FCC
level nor, as far as we know, at the Federal district
court level.
MS. McDOWELL: Well, it certainly is clear from

the act that Congress hoped that State commissions would
want to regulate these agreements to bring their expertise
with local conditions and with local telecommunications to
bear, although Congress, of course, also gave States the
option of allowing the FCC to do that.
QUESTION: Let me ask the question Justice

Scalia doesn't want to ask, and that is, do you have any
legislative history that indicates that they really did

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intend the hodge podge?
(Laughter.)
QUESTION: I mean, if they intended a hodge

podge, I will say God bless the hodge podge, but I
don't -- I haven't heard anyone getting into the
legislative background to indicate that they didn't. you have anything?
MS. McDOWELL: Not really, no. The only
Do

arguable legislative history that seems relevant is that
the State utility commissioners through their
organizations came to Congress and said, we've started to
do this, we would like to have a role in this, and
Congress apparently heard them in enacting --
QUESTION: What about the provision of the

statute itself, that says if the States want to do it,
they can do it? On the other hand, if they don't do it,

the Federal Government -- isn't that -- don't you start
off with a hodge podge? It's going to be State regulation

some places, Federal regulation other places?
MS. McDOWELL: Yes, and that all argues all the

more for Federal court review under 1331 to assure some
uniformity in the application of the Federal standards in
the act.
If I could reserve --
QUESTION: If there's FTC participation, the

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State doesn't participate and there's an agreement, does
that subsequently raise some issues of State law
interpretation, of interpretation that can go into State
court?
MS. McDOWELL: I believe that if the FCC
It hasn't

resolves these issues it may turn to State law.

had the opportunity to issue a decision on this yet, but
those decisions would be reviewable only in the courts of
appeals under the Hobbs act, whether they involve State
law or Federal law issues.
QUESTION: On the Eleventh Amendment point, if

we find that there's a waiver under 252, rather than Ex
parte Young as a theory, would that simplify the question
of determination of State law issues?
MS. McDOWELL: It might or might not. One would

think the extent of the waiver would be governed by
section 252(e)(6), which refers to review to ascertain
whether the agreement or statement complies with sections
251 and 252. law as well.
If I could reserve the remainder of my time.
QUESTION: Thank you, Ms. McDowell. The second
That might be too narrow to encompass State

person doesn't reserve. QUESTION: QUESTION:

You use it or lose it.

She's the first.
She's the first person.

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QUESTION:

Oh, Mr. Evans I thought was the

Ms. Miller.
ORAL ARGUMENT OF SUSAN S. MILLER
ON BEHALF OF THE STATE RESPONDENT
MS. MILLER: please the Court:
I'd like to start out with giving you a little
factual background of what the commission considered and
what Verizon appealed. Essentially, the FCC issued an
Mr. Chief Justice, and may it

order saying that ISP calls to ISP's were largely
interstate. That order also said, for those companies

that had already approved agreements, the State commission
was to look at contract principles to see if the parties
should be bound by their previous agreements, and whether
their previous agreements should be interpreted to include
calls to ISP's being local. That's what the Maryland

commission did in this instance.
Verizon appealed to Federal district court
raising two issues. The first issue was that, under

Maryland contract law, the commission had misinterpreted
the contract. That's the first issue that they raised.

That was clear from their motion for summary judgment,
which is part of the record of the case, but I don't
believe it's included in any appendix to the case.

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The second issue they raised is, after the
commission had interpreted the contract principles, the
commission determined that the FCC order required them to
develop an intercarrier compensation mechanism until such
time as the FCC had developed its own compensation
mechanism.
Now, what Verizon said was that the commission
was wrong, that the FCC didn't require that, that they
made it discretionary for the commission, and those were
the only two issued raised by Verizon in this case.
QUESTION: Excuse me, Verizon was objecting to a

misinterpretation of Maryland contract law, but up here
they're saying that this contract isn't governed by
Maryland contract law, but rather by Federal contract law.
MS. MILLER: QUESTION: MS. MILLER: Their --
Is that a change of position?
Their claim -- what they argued on

their motion for summary judgment was that Maryland
contract law became Federal common law, and that thus it
was --
QUESTION: common law, I see.
MS. MILLER: QUESTION: That was their argument.
So that we have a Federal contract
Maryland contract law became Federal

law that consists of Federal adoption of the common law of

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each of the 50 States that --
MS. MILLER: QUESTION: Whatever their contract law is.
I understand it, I guess.

(Laughter.)
MS. MILLER: So those were the two issues that

were raised by Verizon.
QUESTION: I just want to be sure I understand
That's entirely consistent with

the thrust of your point.

the argument we heard this morning, though, is it not,
because they're basically saying it's all a matter of
Federal law.
MS. MILLER: I just want to make clear that what
They're claiming

they were raising was a contract issue.

that all contract issues are also Federal law now.
QUESTION: MS. MILLER: Right.
I just wanted to make sure the

Court was clear that what -- the sole thing they were
raising was a contract issue.
QUESTION: But they made the same argument at

the district court level, if I understand you correctly.
MS. MILLER: QUESTION: MS. MILLER: that's correct.
QUESTION: And the Federal law is borrowed law
That --
Yes --
It had become Federal common law,

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so far as it involves the interpretation of a contract.
MS. MILLER: That's correct.

Now, the Fourth Circuit dismissed the 1331 claim
on the basis of three alternative grounds. The first

ground was that in relying on Jackson Transit they found
that Verizon's claim did not meet the arising under
standard contained in 1331. According to the Fourth

Circuit, the fact that interconnection agreements are
creations of Federal law did not in and of itself raise a
substantial Federal question.
The Fourth Circuit also relied on Shoshone
Mining, which said that Federal question jurisdiction
isn't established where local rules or customs would
govern the result, which is what we have here, of course.
Maryland contract law is what governed the result here,
that under -- specifically under 252 the negotiating
parties had absolutely no obligation to include anything
from 251 and 252 in their contract. For that reason,

negotiated contracts are kind of taken away from those
aspects of the Telecommunications Act.
QUESTION: Would you think the -- would you

assert that the result would be different and you would
take a different position if this were not a voluntarily
negotiated contract?
MS. MILLER: We still believe it wouldn't come

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under 1331, but for differences other than Jackson
Transit.
QUESTION: you.
MS. MILLER: QUESTION: MS. MILLER: Yes.
Okay.
The petitioners really haven't
Both cases involve the
It would be a harder question for

distinguished Jackson Transits.

precise question of whether an action for breach of
contract arises under Federal law merely because the
contract required -- merely because Congress required the
contract to be formed, or required that the contract --
QUESTION: Mr. Evans offered one distinction,

that there was substantial legislative history there
saying that Congress wanted these actions to be brought in
State court.
MS. MILLER: Jackson Transit I disagree with that reading of

They noted one sentence that they said

led them to believe that Congress wouldn't have wanted
these. There are also several other circuit court cases,

however, that have interpreted Jackson Transit to say that
where State law governs the decision before the Court,
then there is no Federal question jurisdiction regardless
of whether the contract terms were required to be
incorporated or not.

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QUESTION:

I saw two Federal questions, and
His first point, as Justice

either way it seems Federal.

Stevens said, was there's some words in this contract.
This contract is a creature of Federal law. The

interpretation of every one of those words is a Federal
question, whatever source of law that you might come --
turn to to figure out what Federal law is, whether it's
Maryland, or whether it's Alaska, or whether it's some
totally different place.
Argument 2, that the Federal Communications
Commission in a series of decisions, whatever may be true
of other words in the contract, has said that these words
in the contract, A, B, C, D, mean, and then he gets the
result he wants, all right, so he's looking both to the
F -- which obviously the FCC does have the power to do
that, doesn't it?
I mean, it could say as a matter of FCC rule any
contract that has words A, B, and C, must be interpreted
to mean thus and so under this statute.
MS. MILLER: QUESTION: I believe it --
Okay. Now, it seemed to me they're
Is that

making some combination of those two arguments. right?
QUESTION:

Excuse me, it can say that before the
Do you think the FCC has the

fact or after the fact?

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power to say that after a contract has already been
voluntarily negotiated?
MS. MILLER: QUESTION: Well --
And the FCC can say, as a matter of

Federal law, what the parties agreed to voluntarily is
this, even though it plainly is not that?
MS. MILLER: QUESTION: MS. MILLER: I think --
Can the FCC do that?
I don't believe they can, and I

think that was what was the problem with --
QUESTION: question.
(Laughter.)
QUESTION: It's simply a matter of, wouldn't
I don't know what the
If I got us into this, I'd modify the

that state a Federal question?

answer is, but somebody who says just what I said has
raised a Federal question, haven't they, just as somebody
who says this contract is a creature of Federal law, the
word interpretation is Federal, has raised a Federal
question, and you would reply, you're wrong about what the
answer to the question is, but that's different from
saying you haven't raised a Federal question.
MS. MILLER: I think under Jackson Transit what

they've said is that you haven't raised a Federal
question. That's what Jackson Transit said. If you take

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a contract, and your only basis of the contract was that
it was required by Federal law, then that doesn't even
raise a Federal question.
QUESTION: Federal law. They're not saying it was required by

They're saying that the words of the

contract, what they mean is Federal law.
MS. MILLER: That would be a closer question as

to whether that actually raises a substantial Federal
question regarding whether -- because it would obviously
limit a State commission's interpretation. The State

commission could not interpret the word in a different
way.
The second basis for the Fourth Circuit's
dismissal of the 1331 claim was essentially based on this
Court's Merrell Dow decision. In Merrell Dow, the court

found that where a Federal statute includes a limited
grant of jurisdiction, that any other broader grant of
jurisdiction would flout the intent of Congress. Based on

that, the Fourth Circuit found that 252(e)(6) was a
limited grant of jurisdiction and that therefore it should
not allow suit to be brought under 1331.
The respon -- the petitioners have argued that
the rule is otherwise that essentially the courts have
this broad grant authority unless there is some
limitation, but all the cases cited by the respondents

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involve Federal agencies, and there's a distinction here,
because what the Federal agencies were arguing was
essentially that there was absolutely no review of what
was at issue, that you couldn't bring it under 1331, there
was no other statute, essentially it was a discretionary
act of the agency, and you couldn't bring it, and in that
sense the Court --
QUESTION: QUESTION: Oh, now --
Your position is that there's no

jurisdiction under 252, and there's also no jurisdiction
under 1331. Is that right?
That's correct.
And is it because 252 by implication

MS. MILLER: QUESTION:

prohibits 1331 jurisdiction, or just that 1331 isn't broad
enough to cover this?
MS. MILLER: It's that 252 represents a limited

grant of jurisdiction on behalf of Congress, and that
Congress only intended such a limited grant of
jurisdiction, and that therefore to use a broader grant of
jurisdiction such as 1331 would defy congressional intent.
QUESTION: In other words, Congress intended

Federal jurisdiction over review of approval agreements,
but didn't intend Federal jurisdiction over anything else?
MS. MILLER: QUESTION: That's correct.
What do you say to the provision that

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your brother quoted to the effect that there will be no
modification of Federal statutory law unless it's express
modification, which would preserve the full extent of
1331, I suppose?
MS. MILLER: It -- but it also preserves the --

how 1331 has been analyzed in the past, and how 1331 has
been analyzed under Merrell Dow is that you look at the
statute, and if the statute has a limited grant of
authority, then that's congressional intent that that be
the only authority, so 601 didn't change the analysis, it
just says you use the same analysis, and in this case the
analysis is, under Merrell Dow, there is a jurisdictional
statute in the statute at issue, so no other statutes --
so 1331, which is a broader grant of jurisdiction, should
not be used.
QUESTION: What about section 251 of the

Telecommunications Act, which does seem to have a lot of
standards for these agreements. Federal question?
MS. MILLER: Well, but they're -- for negotiated
Wouldn't that make it a

agreements they're not required to incorporate anything
involving 251 and 252, so they've made the choice to not
include those Federal standards by negotiating an
agreement rather than having it arbitrated, so in that
sense, no, it would not raise a Federal question.

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QUESTION:

We're told that the agreements that

are negotiated are not very far distant from what the
standards are under the -- of the statute. The thing is

so set up that the parties will come down to pretty much
what's in the statute. MS. MILLER: in every instance. Is that not so?
I don't know that it's so in any --

In this instance, for a matter of

fact, the initial contract at issue with MFS and Telenet,
Verizon actually agreed to a reciprocal compensation rate
that was higher than the commission's arbitrated rate.
Now, for what reason, I don't know. traded something else for that.
So it's not necessarily so that whatever's in
the statute the parties agree to, and if the parties agree
to that, then they've chosen to agree to that rather than
go to the State commission and say, Federal law requires
this, we don't want to agree to it, but we recognize that
you have the authority to order us to do it.
QUESTION: So you say that what has been created
Presumably they

is this weird system in which challenges to the
interpretation or validity of negotiated agreements can't
go to Federal court, but if it's a challenge to an
arbitrated agreement, it does go to Federal court?
MS. MILLER: Well, we think it would not end up

in Federal court for other reasons, but we -- but --

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QUESTION:

What are the other reasons, because

it makes some difference to me whether there's going to be
this strange line between negotiated and --
MS. MILLER: Well, if you're talking about 13 --

going into Federal court under 1331 --
QUESTION: MS. MILLER: Yes.
-- our argument would be the

private right of action argument, that 1331, you have to
look at the four court factors and things like that, and
that therefore those wouldn't end up under 1331 either,
and also the same argument --
QUESTION: things --
QUESTION: QUESTION: Right.
-- that I think this Court's
One is 1331, general Federal
But then you're blending together two

decisions keep separate. question jurisdiction.
QUESTION: QUESTION:

Right.
That you have to have first, and then

do you have, would you survive a 12(b)(6) motion, do you
have a claim for relief, and you treated that in your
brief, and now again, as though they're the same question,
and they're not.
MS. MILLER: I don't believe, in answer to

Justice Scalia's question, I was treating them the same.

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He asked me what other issues would we raise to say that
this arbitration case shouldn't be in this Court, and that
was one of the issues we raised.
I believe that there are cases that essentially
say that a cause of action is a matter, a matter of
subject matter jurisdiction. There are several circuit

courts that have interpreted this Court's Merrell Dow case
in that manner, but I don't think it's necessary for the
Court to even reach this, because I think the cases can be
upheld based on the Fourth Circuit analysis, and any one
of the three alternatives raised.
QUESTION: in Steel Co.,
MS. MILLER: QUESTION: that again, are you?
MS. MILLER: Do you want to know what the Fourth
And --
You're not going to drag us back into
I thought we wrestled with that issue

Circuit -- how the Fourth Circuit distinguished your Steel
Co. case?
QUESTION: like to know that.
(Laughter.)
MS. MILLER: What the Fourth Circuit claimed you
Yes. I defended in Steel Co., so I'd

were doing in Steel Co. is that you were distinguishing
between Article III subject matter jurisdiction, which had

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to be decided before you reached the merits, and statutory
subject matter jurisdiction, which you didn't have to
decide before you reached the merits under that
hypothetical jurisdiction issue. Circuit has interpreted Steel Co.
So in this instance I believe the petitioners
are wrong in their analysis that you have 1331
jurisdiction unless Congress specifically precludes 1331
jurisdiction. The only cases that has occurred has been
That's how the Fourth

with regard to Federal agencies, as I mentioned earlier,
and that was because to find that 1331 wasn't broad enough
to encompass a Federal agency would mean that there would
be absolutely no review, so I think that there is a
distinction that is important between the two cases.
The final reason the Fourth Circuit found that
the 1331 claim should be dismissed was the Rooker-Feldman
doctrine. Under that doctrine, it involves essentially a

statutory interpretation element and a federalism element.
The statutory interpretation element is that 1257 grants
original jurisdiction to this Court and this Court alone
over State -- I'm sorry. 1257 alone grants this Court

appellate review of State court decisions, and that the
Federal district courts only have review over original
actions, original civil actions, and that by implication,
therefore, Federal district courts have no review over

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State court actions.
QUESTION: Well, how does that fit in with City

of Chicago, where a Federal district court did sit on
those supplemental jurisdiction claims as a reviewer of a
State administrative agency?
MS. MILLER: I think that's distinguishable

because in the case you referred to the district court
already had jurisdiction over Federal claims that were
totally separate and apart from the on-record
administrative review. Essentially, the Federal claims

could have been brought without actually reviewing the
record and the order in the case. It was because the

Federal district court already had that jurisdiction over
those claims that this Court found it could exercise its
supplemental jurisdiction and also hear those claims that
involved the on-the-record State court -- actually, I
think it was actually a local administrative agency in
that case, but the on-the-record review.
So I think this is different in that Verizon
raises no claims that are separate and apart from the on-
the-record review and decisions of the Maryland Public
Service Commission, so in this instance the Federal
district court will be acting as an appellate court,
particularly since I believe virtually every Federal
district court that has considered the issue has said in

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telecommunications cases it's not a de novo review, it is
an on-the-record review, so in this instance they will be
performing an appellate action rather than an original
civil action.
QUESTION: Could you -- in your opinion, if

there is -- suppose it isn't a communications case, it's
common, isn't it, if, say the California State Coastal
Authority, a State agency, orders someone to do thus-and-
so, they could say in Federal court, that order violates a
Federal statute, all right.
Now, in your case, if there were plaintiff just
like this one, and he went into a Federal court and said,
your State court order violates a Federal statute -- so in
other words, suppose it were much more clear, are you
saying there, there's no jurisdiction?
MS. MILLER: There, there would be Federal

jurisdiction if the basis of that claim didn't require the
appellate -- the Federal district court, excuse me, to
actually -- to review the determinations of the Maryland
Public Service Commission to reach the conclusion that
their order violated a Federal law, essentially --
QUESTION: Well, there may often be, with the

California State Coastal Commission somebody says, this is
a taking of my property, or something simpler. Now, it

could be that you have to look at the underlying State

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order in order to deal with the Federal question.
MS. MILLER: To a certain extent you would be

looking at the Federal -- the State order, but you would
not be overturning the State order on the basis that the
State commission found. You would be saying, yes, you

found this, but the problem is, what you found now
implicates this, so --
QUESTION: Well, but what if the Federal

objection was raised at the administrative level, so that
the administrator, the administrative body had said, no
Federal problem. In that case, I take it, your answer

would be no, they can't go into Federal court.
MS. MILLER: That would be correct. They would

have to go through the State court proceedings in that,
and have it resolved in that manner.
QUESTION: May I ask you a procedural question?
Your

I hate to do this, but it seemed to be in the case. client's the commission.
MS. MILLER: QUESTION: That's correct.

Now, it's my understanding that the

commission first raised an Eleventh Amendment problem.
MS. MILLER: QUESTION: case.
MS. MILLER: We were not dismissed from the case
That's correct.
And then it was dismissed from the

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The whole case was dismissed.
QUESTION: come up, then?
MS. MILLER: QUESTION: Well --
It decided as to your client, you're
As to the rest
The whole case -- how did the 1331

out of it because of Eleventh Amendment.

of them they were out of it because of 1331, or --
MS. MILLER: No, Your Honor. At the Federal

district court level, essentially the court decided that
we had Eleventh Amendment immunity and that we were
indispensable parties and, as such, the entire case had to
be dismissed.
The Federal district court also addressed the
1331 issue and found that it would not imply a private
right of action, and that the -- and that his Eleventh
Amendment analysis probably would pertain to the 1331
claim as well.
That's all I have, unless there are any other
questions.
QUESTION: Thank you, Ms. Miller.

Mr. Evans, you have 1 minute remaining.
REBUTTAL ARGUMENT OF MARK L. EVANS
ON BEHALF OF THE PETITIONER IN NO. 00-1531
MR. EVANS: I would just like to read two

provisions, very short provisions from the contract that's

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being interpreted here.

The first says, reciprocal
The second says,

compensation is as described in the act.

as described in the act means, as described in or required
by the act, meaning the '96 telecom act, and as from time
to time interpreted in the duly authorized rules and
regulations of the FCC or the State commission.
Now, if you look at the decision of the agency
here, the State agency here, it is full of a discussion of
what it means, what reciprocal compensation is required
under the act. That was the basis for the interpretation.

The effect of the interpretation was to say,
even though the act doesn't require it, you have to
provide it, because your agreement says you're going to
provide it, and we -- this statement says just the
opposite.
CHIEF JUSTICE REHNQUIST: The case is submitted.
(Whereupon, at 11:51 a.m., the case in the
above-entitled matter was submitted.)
Thank you, Mr. Evans.

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